Income: Flat 2.5% on all income
One rate for every income level and filing status, with no brackets.
Financial planning in Arizona
A flat-fee financial advisor serving Arizona.
A flat 2.5% — one of the lowest income tax rates of any state that has one.
Flat 2.5% on all incomeArizona income tax, tax year 2025.
NoneArizona estate tax.
$150–$1,650/qtrFlat quarterly memberships, no AUM fee, no annual commitment.
Minnetonka-basedA Minnesota firm serving Arizona households virtually; no Arizona office is claimed.
Direct answer
What Is Different About Financial Planning in Arizona?
Arizona levies a flat 2.5% individual income tax with no brackets. Social Security is not taxed and military retirement is fully excluded, but private pensions and IRA and 401(k) withdrawals are fully taxable, and the $2,500 public-pension exclusion applies only to federal and Arizona government pensions. There is no estate or inheritance tax. For people who retire here after a career elsewhere, the work is usually about how another state's pension and a lifetime of tax-deferred savings are treated now.
Arizona tax treatment
How Arizona taxes a planning household
Figures are for tax year 2025, each read from the source beside it. Thresholds and rates are revised regularly; confirm the current year before acting on any of them. What these rules change in a household’s plan, from the order accounts are drawn to the timing of Roth conversions, is set out in the retirement tax planning overview.
Source
Retirement income: Social Security and military pay excluded; most other retirement income taxed
Social Security and Railroad Retirement benefits are not taxed and military retirement pay is fully excluded. Private pensions and IRA and 401(k) withdrawals are fully taxable, and the $2,500 pension exclusion covers only federal and Arizona government pensions — a pension earned in another state does not qualify.
Estates: None
Arizona's estate tax was tied to a federal credit that was eliminated in 2005, and the state imposes no inheritance or gift tax. Only the federal exclusion applies.
Worth doing here
Planning opportunities specific to Arizona
Things that are worth doing in Arizona that would not be worth doing, or would work differently, somewhere else.
The 529 subtraction
Contributions to a 529 plan can be subtracted up to $2,000 a year ($4,000 filing jointly), and the subtraction is not limited to Arizona's own plan.
Cheap Roth conversions
At 2.5%, the state cost of converting tax-deferred savings to Roth is small, which makes the years before required distributions unusually good for it — especially for someone who may later live in a higher-tax state.
An out-of-state pension gets no exclusion
Retirees arriving with a government pension from another state often expect the $2,500 exclusion and do not get it. Knowing that shapes how much to draw from which account.
Federal and state, together
How Arizona Tax Interacts With Your Federal Return
At 2.5% the state income tax stays small relative to the federal deduction cap, so for most Arizona households property tax is the larger state-and-local item and the cap rarely binds.
The federal deduction for state and local taxes is $40,400 for tax year 2026 and begins to shrink above $500,000 of modified adjusted gross income, down to a floor of $10,000, and is scheduled to return to $10,000 after 2029. The federal estate tax exclusion is $15,000,000 per person for deaths in 2026. IRS, Instructions for Schedule A (2025), line 5e; IRS, tax year 2026 inflation adjustments (Rev. Proc. 2025-32).
Cities
Where we work with Arizona households
Each city page covers what is local — how households there tend to be paid, what the first meeting usually covers — and inherits this state layer.
Phoenix, AZ
A large retiree population alongside semiconductor, aerospace, and healthcare employers.
Scottsdale, AZ
Scottsdale is a destination for retired executives and business owners from higher-tax states, with a professional population employed by the Mayo Clinic's Arizona campus, HonorHealth, Vanguard's large Scottsdale operation and the corporate offices along the Loop 101.
Tucson, AZ
Tucson is paid by the University of Arizona and its health system, by Raytheon's missile business and Davis-Monthan Air Force Base and the contractors around them, and by a large retiree population in the foothills and in Green Valley and Oro Valley.
Watch and learn
Financial Planning, Explained Clearly
Start with three videos selected for this page, then use the controls to explore every published Flames FP video guide.
Videos 1–3 of 14
What Nobody Tells You About Earning $400K a Year
See why a $400K income can still leave too little investable margin and how taxes, lifestyle growth, and deliberate investing change the result.
The RSU Strategy Most $300K Tech Earners Miss
Understand taxation at vesting, check the withholding gap, and turn each RSU vest into a deliberate diversification and household-planning decision.
The 3-Account System for a $250K Income
Use cash reserves, tax-advantaged accounts, and a taxable brokerage account to turn a strong income into a repeatable wealth-building system.
The 6 Levels of Wealth for $200K+ Households
Use six stages to separate a high income from the wealth it actually creates.
The Most Underrated Retirement Account
How a taxable brokerage account can support retirement flexibility alongside tax-advantaged accounts.
How to Decrease Your Tax Bill
Review practical tax-planning decisions that can connect income, investments, retirement, and withholding.
Should You Invest or Spend Your HSA?
A practical framework for deciding how an HSA fits healthcare costs, taxes, and retirement planning.
Four Common Backdoor Roth IRA Mistakes
Understand contribution, conversion, pro-rata, and reporting mistakes before they create tax problems.
Direct Indexing vs ETFs in a Taxable Account
Compare diversification, tax management, cost, and complexity before changing an investment strategy.
My New Favorite Account to Gift Money to Kids and Grandkids
Compare the new child investment account with 529 plans, custodial accounts, Roth IRAs for earned income, and the family's actual goals.
Estate Planning Documents You May Need
A plain-English review of wills, powers of attorney, healthcare directives, beneficiaries, and trusts.
Flat Fee vs 1% Financial Advisor
See how a percentage fee changes in dollars as a portfolio grows and what to compare beyond the headline rate.
How Much Life Insurance Do You Need?
Think through income replacement, debt, children, childcare, education, and family risk.
Five Money Mistakes High Earners Make
Common coordination gaps involving taxes, cash flow, investments, insurance, and estate planning.
Common questions
Arizona Financial Planning Questions
Does Arizona tax Social Security?
No. Social Security and Railroad Retirement benefits are not taxed by Arizona.
Does Arizona tax pensions and IRA withdrawals?
Yes, at the flat 2.5% rate. Military retirement pay is fully excluded, and up to $2,500 of a federal or Arizona government pension is excluded, but pensions from other states and all private retirement income are taxable.
Is there an Arizona estate tax?
No. Arizona has no estate, inheritance or gift tax.
Does Flames Financial Planning have an office in Arizona?
No. Flames Financial Planning is based in Minnetonka, Minnesota, and serves Arizona households through a virtual planning relationship. This page describes the service area and does not claim a Arizona office.
Is Arizona tax planning part of the relationship?
Yes. State tax treatment shapes withdrawal order, Roth-conversion timing, and where investments are best held. Planning includes tax guidance and review of a completed return; Premier adds tax projections and preparation and filing through an independent tax partner.
Next step
See what a flat-fee relationship would cost a Arizona household.
A discovery meeting covers your situation, what you pay now, and whether a fixed quarterly membership is a better fit.